After months of fanfare, the Palm Pre went on sale June 6 and was met with the
type of reception Palm and its carrier Sprint were hoping for-according to
Sprint, the Pre broke its records for both first-day and first-weekend sales of
a device.

However, opinions of the Pre on June 6 didn't necessarily hold once June 8
brought Apple's announcements at its Worldwide Developers Conference in San
Francisco.

"The Palm Pre was an effective response to the original iPhone, but only
partly a response," said Gottheil.

In the Pre's defense, he offered that the iPhone doesn't multitask as well as
the Pre, and the Pre features a dedicated keyboard and is attractive. "But
the iPhone 3G S will throw some cold water on Palm's debut," Gottheil
conceded.

Carolina Milanesi, a Gartner research director, pointed to Apple's ability to
use price to its advantage.

"The new price point of $99 is going to make competition more aggressive,
as this is the price point that the Pre was after. And, of course, the iPhone
still has a stronger brand appeal and a stronger ecosystem," Milanesi
said. "The changes are not that drastic from a hardware perspective, but
the new OS and other software enhancements do offer an interesting solution,
especially considering you are getting more for the same price."

While the iPhone 3G S hardware improvements are noteworthy, the new operating
system is what will continue to distinguish the iPhone from the other
smartphone competitors.

"Improvements such as cut, copy and paste [and] the new landscape keypad
as well as the voice control will all help increase usability," Milanesi
said. "Other improvements such as memory, camera and MMS
[Multimedia Messaging Service] support also make sure the iPhone caught up with
the competition on some key requirements. But most of all the new OS and the
application offerings continue to set Apple apart from its competitors."

Analyst Adam Leach of consulting company Ovum said in a statement that Apple's
new offering was evidence of the move toward managed device platforms, or MDPs.

"Consumers will increasingly make buying decisions based not on a device's
potential to support advanced capabilities but-crucially-on the vendor managing
their data and services on the device," Leach wrote. "The ability to
deliver a tightly integrated end-to-end service proposition including content
and applications directly to consumers was pioneered by Apple; however, the
adoption of the MDP model by Nokia, Google, Microsoft,
Sony and other major vendors will drive the adoption of smartphones."

Ovum expects 171.9 million smartphones to ship globally in 2009, for a growth
of 23 percent from 2008. Meeting this expectation, smartphones would represent
15 percent of the total
worldwide mobile phone market.

TBR's Gottheil agreed that Apple's application offerings are a part of what
sets it apart.

"It makes a potential competitor have a two-part problem-you need a darn
good device, and the ability to fill it with content that will drive people to
it," Gottheil said.

"It's like a horse race. You stay in in case the leader stumbles or gets
tired, or you find an extra burst of energy. But no one entering [the] race at
this point is going to slow down Apple or RIM; they have an open field ahead of
them."

An Apple level of success, Gottheil said, "takes sustained excellence, and
some good luck."